How the Packers Lost Out: By Eschewing Market-Based Prices for PSLs and Instead Accepting Public Financing for Stadiums, Teams Are Missing a Remarkable Revenue Opportunity. (Sports)

Gorman, Michael F., Brannon, Ike, Regulation

A FEW YEARS AGO, THE GREEN BAY Packers decided to renovate their stadium in order to remain competitive in the NFL. They complained that Lambeau Field lacked many of the revenue-generating features that are staples of the newer stadiums, such as club seats, sky-boxes, and ample concession stands.

Raising the money necessary to add such features proved to be tricky. Being a publicly owned corporation, the team lacked a deep-pocketed owner who could make the investment himself. The usual route for a professional sports team that wants to renovate or replace its current stadium is to ask the government to pay for the improvements. But in Green Bay, that option was problematic; a few years earlier, the state legislature narrowly voted to increase the sales tax in Milwaukee and nearby counties to pay for a new baseball stadium for the Milwaukee Brewers. The political fallout from that decision was significant, with the legislator who provided the deciding vote being recalled by an irate electorate. While the Packers argued that the team was an asset belonging to the entire state, the legislature was not going to risk incurring the wrath of voters again and would only contribute a small amount for infrastructure improvements.

Undeterred, the Packers chose to press the local government entity, Brown County, to impose an additional local sales tax of a half-percent to finance the remodeling of Lambeau Field contingent upon a countywide referendum. With the team coming off a string of successful seasons and the support of local political leaders, the Packers felt confident that they would win any referendum.

The team's lobbying efforts dwarfed that of its opponents. The Packers employed a slick public relations campaign, bringing back players from the glory days to appear in ads and meet with voters to impress upon them the need for their tax money. The Packer's campaign on the referendum presented a stark choice to the voters: If the referendum did not pass, they claimed, the team would either be forced to move or else declare bankruptcy within five years. The referendum narrowly passed.

PYRRHIC VICTORY?

The stark choice presented to voters was a lie: Because of its status as a publicly owned corporation that pays no dividend or capital gains, the team could not move anywhere. What is more, given the enthusiastic support the team receives across the entire state, it is difficult to conceive of where the Packers might move and generate more revenue, regardless of any sweetheart stadium deal they might receive from another community. And while the team's revenue was in the bottom half of the league when the referendum was passed, the ample amount of shared revenue in the league virtually guarantees an NFL team solvency regardless of the team's ancillary revenues. The projections offered by the team showing that it would soon be last in the league in revenue were pure sophistry.

The team could have raised sufficient revenue to cover the stadium renovation without resorting to government largesse. Instead, the Packers could have sold personal seat licenses (PSLs) -- that is, the rights for fans to buy tickets for certain seats -- at a price that reflected market demand, rather than for the pittance that the team actually charged. But the Packers refused to sell PSLs at a price the market would bear, probably because of the risk-averse culture of professional sports as well as the willingness of governments to cough up money for stadiums.

The team should regret that it did not fully exploit the value of the PSLs. Thanks to the Internet and the increasing ease of online auctions, an entrepreneurial owner who fully exploits the value of PSLs will generate revenue dwarfing what the Packers received from their PSL sales. But, because they used the "traditional" stadium funding approach, the Packers likely will be in the same revenue situation in five years that they were in before the renovations took place, and not have the ability to rectify the situation. …

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